The joining of two people in marriage is quite a significant event, not only for the families of the newlyweds, but for their finances as well. While bringing together two incomes is a pretty straight forward endeavor, bringing together various expenses, assets, liabilities and the possible emotion connection to them can be tricky.

In my previous post “You’re Engage, Create a Financial Plan”, I discussed some of the advantages of having a financial plan before you’re actually married. In short, creating a financial plan can help you and your future spouse explore your life’s goals and objectives before tying the knot. This will help significantly reduce the possibility of disagreements when managing your finances in the future.

If you are a newlywed or recently became engaged, start the financial planning process by defining your combined goals and objectives. Once complete, the following steps will help you merge your finances and create a joint financial plan.

Data Collection and Analysis

During this memorable time in your lives, it’s important to locate all of the data that will impact your financial well being. This information will be used to construct your financial planning statements and determine the strengths and weaknesses that exist in your current financial situation.

The first step is to gather your qualitative financial planning data. This information will help you explore and document your risk tolerance, past experiences with money, feeling towards different investment products and your retirement expectations. This data is mostly used in the consideration of shared values and the emotional connection to various financial decisions.

In contrast, quantitative financial planning data is more numerical in nature. Gathering this data can be accomplished by listing the title and value of your cash accounts, insurance policies, estate planning documentation, and historical tax returns. This data will be used to develop forecasts and determine the affordability of your goals and objectives.

Once you have gathered and listed all of your financial planning data, it’s time to determine which accounts and policies should be merged, eliminated or simply left alone.

Merging Accounts and Financials

The decision to merge accounts and other financial planning tools, can be difficult. This is not only due to the volume of forms that will have to be filled out, but also the fear of losing control over a very important aspect of your personal life.

To begin merging accounts, it’s important to understand the advantages and disadvantages of each one. This will help determine if there could be any savings or added complexity from merging accounts (such as consolidating insurance policies or changing beneficiaries).

Once all of your options have been laid on the table, it’s time to merge the accounts that have the most advantages. When merging accounts, remember you don’t have to do it all at once. As long as there is open and honest communicate accompanied by a clear action plan, you can merge your financial accounts when it’s best for you and your schedule.

In today’s fast moving and advanced world, marriage is more than a romantic commitment to the person you love, it’s a business arrangement as well. Newlyweds should take the time to create a financial plan. This will ensure that the business side of you relationship is healthy and moving in the right direction.

It’s no secret that financial issues can place a severe strain on a marriage. Despite the fact that disagreements over the use of financial resources can stem from an underlying conflict of values within the couple, the cause of the argument is usually blamed on money. Studies have shown that financial issues and lack of preparation are two of the most common causes of divorce in the United States. With that said, I’m going to proclaim that a financial plan can help strengthen a marriage even before the couple walks down the aisle.

The financial planning process includes the exploration of shared values, goals and objectives. A couple’s understanding of these individual characteristics are critical when planning to share the rest of their lives with someone else. Making the decision to create a financial plan before you get married is an excellent way to prepare for the future, both mentally and financially.

Getting Started with Your Plan

Sitting down with your future spouse to develop a list of goals and objects can be perceived as a less than romantic endeavor. While I agree that conducting a business-like meeting with the love of your life is not the ideal evening, I will argue that it will empower your relationship in the long-run.

To get started, grab paper and a pen and gather somewhere comfortable. One of you will have to take the lead and write down the critical points of your conversation. During this exercise remember that developing a financial plan will take many iterations. So you should just aim to create a rough draft in your first meeting.

With all of that said, develop a list of your individual and future family’s goals and objectives. You should keep in mind that these are your personal life goals, not your financial aspirations. At first it will be difficult to separate the two as we often constrain our goals on our ability to afford them, however there’s no pressure as this is just a draft.

Prioritizing Your Goals and Objectives

Chances are pretty good that you will not be able to afford all of your goals and objectives when starting a new family. This is quite a common challenge as young families have many large expenses in their early years (mortgage, school loans, children, etc.).

With that in mind, you will most likely need to sit down with your future spouse and prioritize your goals and objectives. The prioritization of your future goals and, consequently, the focus of your financial management process is important to mutually agree on. This will help reduce the potential for misunderstandings and disagreements in the future.

To begin, take your completed list of goals and objectives and determine which is the most and least important to you and your future spouse. These will be your guides as you question which goals should be a higher or lower priority. Once complete you will be able to easily determine the ones that require funding before the others.

Creating a financial plan before you get married is a great way to get a deep understanding of your future spouse’s goals, objectives, priorities and financial management savvy. This plan doesn't have to be robust to be effective, just having the conversation is important.

Normally I do not begin to think about holiday shopping until the beginning of December. This is in despite of the fact that I consistently have more credit card debt after the holidays than I feel comfortable with. With that said, I’ve decided that this year is going to be different. In the attempt to avoid the annoyance of post-holiday credit card debt, I’m going back to the basics of personal financial management and prepare early for the holidays. I wanted to share the following ideas to help holiday-proof your finances.

Create a Holiday Savings Account

If you’ve read any of my other articles, you know that I’m a huge fan of creating purpose specific bank accounts. Creating a separate savings (or checking) account specifically for holiday expenses can make saving money a little easier.

Separating your savings into accounts like “household expenses”, “vacation fund” and “rainy day account” can help reduce the negative psychological effects of spending too much money. These effects include regrets such as post holiday guilt… “Why did I rack up all of that debt?”

Additionally, creating a holiday savings account and funding it over the course of the year will help spread the cost of these one time expenses over a longer period. This will reduce the stress of dealing with large one time expenses and ensure your budget is at least manageable at the end of the year.

Forget the Discounts, Shop Early

Every year local news channels hype up American consumerism by stressing the importance of getting “great deals” when buying holiday gifts. Unfortunately, feeling like you’re getting a great deal and saving money (when you are actually spending it) normally leads to overspending.

When retailers discount the prices of their inventory for the holidays, they don’t have your best interest at heart. These corporations are competing with other stores for your business and are attempting to increase demand for their goods through a reduction in price.

With that said, saving a few percent on a television purchase is not worth the wait or the hassle. Shopping early can help you keep your finances under control by spending a little of each paycheck on holiday purchases. This helps reduce cash flow volatility at the end of the year.

Avoid Materialism, Give Life Experience

We might share the opinion that many Americans have forgotten (or never really knew) the true spirit of the holiday season. As I eluded to earlier, our society has turned the holidays from a time to cherish our families to a time of materialistic pursuits and financial stress.

The holiday season is not competition where we see whom can spend the most money. Affection for one another should not be quantified by monetary value, but for laughter and shared experiences.

If you want to holiday-proof your finances, change the way the holidays are celebrated in your family. Incorporate time for meaningful discussions and celebrate the things that truly matters in life.

This holiday season improve your financial decision making by creating a plan and start early. I encourage you to create a holiday savings account, start funding it now and remember to focus on life experience and not material gifts.

In the past few months I have been a little frustrated with the progress of my financial situation. Due to a few unexpected life events, I’ve had to deal with a few cash flow issues which took me out of my financial comfort zone. In addition to a temporary loss in revenue, I also had a few large and unexpected bills that I had to pay. This situation had a substantial impact on my day-to-day activities as I wasn’t able to implement my financial plan as I usually do.

Despite my temporary financial situation placing me at unease, I was prepared for it and made it through relatively unscathed. The experience reminded me of a few financial management words of wisdom and three important personal finance concepts.

Being Prepared is Critical

All of us will be affected by changes in our financial situation regardless of location, culture or material wealth. However the impacts of unfortunate life events and their subsequent financial hardships will vary significantly between families. More often than not, the difference between critical and negligible impacts to your finances will be based on your level of preparation.

Being prepared for a financial emergency starts with having an understanding of your financial risks. Taking an inventory of your financial risks will help you avoid them and adequately prepare for them if and when they occur, this is also known as risk management for financial planning. The best way to understand your financial risks is to make a list of life situations that can affect your ability to earn income and all potential large expenses (vehicle maintenance, medical procedure, etc.).

While insurance is a great way to offset the financial impacts of certain life events, your insurance policies will not cover everything. This is why a safety fund is so important. Having 3 to 9 months of your salary saved for a financial emergency will help you deal with a tough situation.

Keep Your Attitude in Check

Mental attitude is an important factor when it comes to dealing with stressful situations. This is especially true when considering the impact of financial constraints on your emotional state and lifestyle. It’s natural to become frustrated and lose hope at times, however don’t let your emotions dictate your financial decisions.

The most important element of savvy financial decision making is keeping your emotions in check. One of the best ways to clear your mind and make logical decisions is to understand everything about your situation.

To bring clarity about your financial situation, begin by determining how long your new financial situation will last. Next attempt to calculate how large the financial impacts will be on your budget. These two pieces of information will help you determine what changes you will need to make to keep your finances under control.

Making Lifestyle Changes

Once you have a checked your emotions and measured the financial impacts of unexpected life events, you can begin to plan how you will get through this tough situation. More often than not you will have to change your lifestyle to reduce your monthly expenses and remain under budget.

Making lifestyle change is difficult, however it's often necessary. The easiest way to remain under budget is to make a list of all of your priorities from most to least important. Next you should assign the cost of each priority (i.e. monthly car payments), then go down the list and scratch the ones that you can’t afford, starting with the lowest priority first.

This is the easiest way to adjust your lifestyle and budget without causing too much turbulence in your daily life.

Adjusting budgets due to unexpected life events is a challenging, yet often necessary, endeavor. When facing an unexpected life event that creates a financially challenging situation remember to check your emotions, understand your situation and strategically reduce your expenses.

In my experience, financial success is gained through two key actions that we all have the ability to leverage. The two keys to financial success is hard work and sound decision making. Over time if we consistently make unwise decisions, we will find ourselves in a situation that is difficult to recover from.

Just like other things in life, achieving financial success is more about hard work and making the right choices rather than circumstances outside of our control. Making savvy financial decisions starts with understanding why we make bad financial decisions in the first place and making a conscious effort to change the way handle our money.

None of us are perfect as we are all human and are guided through life by a mix of ideals, morals, instincts and emotions. These factors can have a large influence on the financial decisions we make everyday. Some help us make good decisions and others not so much.

Savvy financial decision making begins with understanding that emotions and other elements of the human experience can impair your ability to make good financial decisions. The following list of savvy financial decision examples can help you improve your financial situation and avoid making poor financial decisions in the first place.

Making Better Financial Decisions

Create a Financial Plan - You know my first piece of advice will always be to create a financial plan. A plan will automatically help you increase your financial decision making savvy by showing you the impacts of the decisions you make on a daily basis.

Difference Between Needs and Wants - Far too often we buy the things we do not need. When we spend money to buy frivolous items or overpay for things we do need, we are throwing away the opportunity let our savings and investments grow at a faster rate. Take the time to explore the concept of needs and wants, let your conclusions guide your future financial decisions.

Don’t Max Out Your Mortgage - In the past, many of us have bought as much house as the bank would let us. We let the lenders and mortgage companies tell us what we could afford. This decision put many of us in a rough financial situation that we are still working through. So if you are exploring the opportunity to buy a house, don’t max out your mortgage.

Automate Your Budget - Taking the emotion out of budgeting and spending less is as easy as opening a bank account. When separating your discretionary and nondiscretionary expenses into two banks you will make it easier to save money by removing the temptation to buy the things you don’t really need.

Invest a Little Each Paycheck - Consistent investing is the best long-term strategy for making your money work for you. If your company offers a 401k or other defined contribution retirement plan, take advantage of it. Investing 5-10% of every paycheck is a great way to build a solid nest egg and easily increase your net-worth.

Don’t Ignore Insurance - One large bill, from a car accident for example, can wreak havoc on your financial plan and severely limit your chances of ever being financially independent. Ensure that your insurance covers you from any large unavoidable bills in the future. I know paying for insurance is not on the top of your to do list, however you will thank me if anything ever goes wrong.

More than just logic plays a role in the financial decision making process. Sometimes emotion reduces our ability to make the best decision concerning our financial situation. Regardless of your circumstances, the above mentioned savvy financial decisions will help you improve your finances and way of life.